Vicki owns and operates a news agency (as a sole proprietorship).During 2019, she incurred expenses of $24,000 to increase circulation of newspapers and magazines that her agency distributes.For regular income tax purposes, she elected to expense the $24,000 in 2019.In addition, Vicki incurred $15,000 in circulation expenditures in 2020 and again elected expense treatment.What AMT adjustments will be required in 2019 and 2020 as a result of the circulation expenditures?
A)$16,000 positive in 2019, $2,000 positive in 2020.
B)$16,000 negative in 2019, $2,000 positive in 2020.
C)$16,000 negative in 2019, $10,000 positive in 2020.
D)$16,000 positive in 2019, $10,000 positive in 2020.

Question

Quizplus · Accepted Answer

For AMT purposes, circulation expenditures are capitalized and amortized over 3 years. In 2019, $8,000 is deductible ($24,000/3), resulting in a $16,000 positive AMT adjustment ($24,000 - $8,000). In 2020, $10,000 is deductible ($5,000 from 2019 and $5,000 from 2020), resulting in a $2,000 positive AMT adjustment ($15,000 - $10,000).

Vicki Owns and Operates a News Agency (As a Sole